Used construction equipment values continued to fall in July as inventory piled up on dealer lots, prolonging a yearslong trend that could worsen in the coming months.
The July inventory surge came despite the construction equipment market being generally more durable than other heavy equipment sectors, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.
“It’s been a little bit more resilient because construction has such a wide range of use,” Ryan said. “But it’s getting to a tipping point now. And I think between now and year end, you’re going to see some pretty significant drops as we get into October, November, December.”
Rising inventory in July depressed auction and asking values for used medium- and heavy-duty construction equipment, according to Sandhills Global’s monthly report released Aug. 6.
Medium-duty equipment
- Used inventory increased 45.7% year over year and 1.6% month over month.
- Skid steers drove the surge, rising 62.4% YoY.
- Auction values fell 11% YoY, while asking values dropped 6.9% YoY.
Heavy-duty equipment
- Inventory rose 20.4% YoY and 1.8% MoM in July, adding to consecutive months of increases.
- The wheel loader category saw the largest jump in inventory with a YoY increase of 32.8% YoY.
- Auction and asking values fell 10% YoY and 5.1% YoY, respectively.
Used lifts
- Inventory was up 10.1% YoY and 0.05% MoM in July. That followed a 5.3% MoM increase in June.
- Auction values were down 17.8% YoY, while asking values dropped 10.5% YoY.
Residential building sluggish
Increased inventory in July was partly due to a slowdown in residential construction activity, driven by factors such as tight lending standards and high material costs. Subdued residential building has especially hit the medium-duty market, Ryan said.
“With interest rates being high and residential building slowing down, it’s 100% directly related, because that medium-duty construction market is what fits that residential category to a T,” he said.
Rental returns and liquidation also contributed to higher inventory as smaller contractors looked to offload equipment that they would have held onto under better economic conditions, Ryan said.
Large construction companies, meanwhile, have been less affected by industry challenges, he said. Thus, inventory gains on the heavy-duty side have been noticeably smaller in recent months as large companies embark on large-scale projects.
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